Q4 2004 Alaska Communications Systems Group Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to the Alaska Communications fourth quarter and year end 2004 conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks we will hold a Q&A session. To ask a question please press star followed by the one on your touch-tone phone.

If anyone has difficulty hearing the conference, press the star followed by the zero for operator assistance. As a reminder this conference is being recorded today, February 24, 2005.

I would now like to turn the conference over to David Barnard of Lippert Heilshorn and Associates. Please go ahead, sir.

DAVID BARNARD, LIPPERT/HEILSHORN & ASSOC, ALASKA COMMUNICATIONS SYSTEMS GROUP: Thank you. Good afternoon and welcome to the Alaska Communications fourth quarter and year-end 2004 results conference call. This call is also being broadcast live over the Internet and can be accessed from the Investor Relations website at www.ALSK.com.

With me on today's call are Liane Pelletier, President, Chief Executive Officer and Chair of ACS, David Wilson, Chief Financial Officer, and Leonard Steinberg, General Counsel. After the market closed today, ACS issued its fourth quarter and year end results. If you would like to obtain a copy of this release or the 10-K filing which will be filed before March 15, you can access them online at the company's website, or you can call Lippert Heilshorn and Associates at 415-433, 3777, and we will fax or e-mail you a copy.

Further in compliance with SEC regulation G, can you find reconciliation tables for all non-GAAP numbers referred to during this call attached to the earnings press release and posted on the website www.ALSK.com. This is a formal update, and I should advise you that our remarks today contain forward-looking statements, within the meaning of the United States Securities laws, including statements concerning future rates, revenues, costs, capital expenditures, financial needs and availability, as well as statements of management's expectations and beliefs.

Actual results could differ materially from these statements as a result of many factors, including the future economic, regulatory and political conditions in the state of Alaska and the United States.

And with that I would like to turn the all over to Liane. Liane?

LIANE PELLETIER, CHAIR, PRESIDENT, CEO, ALASKA COMMUNICATIONS SYSTEMS GROUP: Thank you, David. Welcome and thank you all for participating today. 2004 was an outstanding year for Alaska Communications Systems. At the beginning of the year we prioritized our goals four 2004. They were to create a customer focused operating model, to capitalize on the underserved wireless market, to demonstrate growth, and to generate cash. We clearly accomplished this.

Adjusted revenues grew 3.6 percent annually. Our annual adjusted EBITDA grew 5 percent. And cash provided from operations increased 15 percent compared to last year. Equally important, we positioned the Company to take advantage of financing opportunities, when the time was right. Since our last call last quarter, there have been some significant improvements in our capital structure. David Wilson will review the details of recent capital transactions in his remarks, but the net result is that ACS begins 2005 with a lower debt to equity ratio, a net reduction in borrowing costs, and a broader base of shareholders. Today, we have 8.8 million additional shares, and approximately 80 new institutional investors.

Of course, these capital markets transactions would not have been possible without this management's team's ability to execute operationally. This past year, we aligned our customer-driven strategy, with an operating model that is delivering steadily improving results. We increased our total retail relationships during the fourth quarter, by 7,800 to 397,000. These 7,800 build upon sequential increases of retail relationship additions of 4,100 for the third quarter, and 1,400 for the second quarter. We continue to bundle and grow share of wallet with different bundles appealing to different segments. Not in a one-size-fits-all manner.

In the fourth quarter, we added product depth to several thousand of our consumer and business customers, via mobile-to-mobile and mobile-t o-home bundles, wireless bundles, DSL bundles, dish bundles, long distance bundles, and of course local feature bundles. For consumer, we saw an increase of both wireline and wireless revenues during the fourth quarter as a result of retention, win back and sales campaigns, aimed at building share of wallet among target customers while local relationships shrank, it is the case that Internet, long distance, and wireless relationships grew, and total revenues grew as well. Our business sales team continued to drive results and we saw positive subscriber growth in long distance, Internet and wireless in the quarter.

The number and value of business customers won, exceed the number and value of business customers lost in the quarter. Now, a bit about each product. In wireless, we hit the 100,000 subscriber mark in the fourth quarter as we added over 5,000 net new subscribers, up over 5 percent from the third quarter, and up over 15 percent from a year ago. We believe this represents a penetration rate of over 20 percent of the population within our wireless footprint. Number portability continues to be a big driver enabling us to gain share in this market, as 7 out of 10 porting customers in Alaska choose ACS.

Over 20 percent of our fourth quarter additions came from customers who brought their old telephone numbers to ACS. Significantly, over 80 percent of our new wireless customers in the fourth quarter signed up under contract, and over 70 percent signed up under a two-year contract. Our voice roaming revenue agreements with the two largest CDMA carriers in the lower 48, contributed to fourth quarter roaming revenues which is up 150 percent from last year. Our mobile data capabilities are clearly the strongest in the Alaska market. In the fourth quarter, over 13 percent of our CDMA customer base had a mobile data plan, and spent an average of $14 per month on mobile data services.

On to DSL. DSL subscribers increased to almost 25,000. Up over 2,100 lines from the third quarter. Representing a sequential increase of 9.4 percent. Our total number of Internet subscribers stood at 47,500 at the end of the quarter, up over 1,200 from the end of the third …